Morgan Stanley PE invests in China's Tianhe Chemicals

Morgan Stanley’s Asian private equity arm is set to invest $300 million in Tianhe Chemicals, a specialist chemicals company in China with ambitions to expand overseas.

In addition, Homer Sun, chief investment officer of Morgan Stanley Private Equity Asia, will join the company’s board.

Tianhe is China’s biggest producer of lubricant oil additives, and a global producer of specialist fluorochemicals often used in chemical waterproofing. Established in 1992 in Jinzhou, Liaoning Province, Tianhe employs more than 1,200 people in three manufacturing bases. But now it’s looking to become a bigger player, and bringing in private equity will provide the expertise to realise that ambition.

“We are very excited to enter into a long-term partnership with the outstanding management team of this Chinese specialty chemicals champion that has developed world-class R&D capabilities,” said Sun. “We expect to closely collaborate to support Tianhe’s transition from a domestic leader to a major global player in specialty chemicals.”

This is the biggest single investment Morgan Stanley Private Equity Asia has made during more than 19 years of doing business in the region. Indeed, the team has invested approximately $2.4 billion in Asia, primarily in highly structured minority investments and control buyouts in profitable, growth-oriented companies.

Last year, Tianhe was considering a $1 billion IPO in London, but the listing has been postponed in the wake of market uncertainties in Europe. But there are other ways to raise money, as this transaction demonstrates. Partnering with a PE firm will allow Tianhe to leverage Morgan Stanley’s global network and knowhow to help it enter new markets in a smart way — and one that is profitable for all.

“We are pleased to forge this strategic partnership with one of Asia’s leading private equity investors,” said Xuan Wei, chief executive officer of Tianhe. “MSPE Asia brings deep experience adding value to companies in China, coupled with industrials expertise and global resources, and we look forward to working together to expand our global market reach and increase cooperation with overseas partners.”